America's Greatest Brands

History

GEICO founder Leo Goodwin joined the insurance industry in 1925 when he was offered a job with San Antonio–based United Services Automobile Association (USAA). Over the next nine years he learned the technical intricacies of the insurance business while rising steadily through the ranks to the position of general manager. Goodwin had progressed as high as he could go in the company because only a retired military officer was allowed to hold the top spot at USAA. So he took a leap of faith by leaving USAA to start his own insurance company during the height of the Great Depression.

Goodwin took a page out of the USAA book — which he himself helped create — by choosing a very select group of consumers for his customer base: federal employees and non-commissioned officers. But rather than offer dividends to customers for any favorable loss experience, as mutual companies do, Goodwin chose to sell policies at discounted rates and pass the savings directly along to customers right up front. He also marketed directly to his customer base, allowing him to charge lower premiums and still earn a profit. These same tenets make up the essentials of the GEICO business model that remains successful today.

By the end of World War II, GEICO sales soared to $1.6 million and then to $2.4 million the following year, due in large part to the growing number of cars in production and improvements in roads, availability of gasoline, and the overall improving economy. The decade ended on a high note in 1949 with GEICO creating a life insurance company and an auto finance company.

The next two decades were a period of enormous growth for the company, as policies in force passed 2 million. But the days of strong growth had a downside, as the company’s loss reserves dwindled because of underwriting and investment losses. Chairman and CEO Jack Byrne arrived in 1976 to turn things around. He developed a recovery plan that included the strictest of cost controls and a complete reunderwriting of the company’s entire book of business. The plan worked, quickly returning GEICO to profitability.

The late 1970s and early 1980s brought GEICO back to financial health, and the company embarked on a mission to build stronger internal operations to better service its customers. In 1994, GEICO launched its four-company strategy (see next page), now offering rate quotes and policies to people who did not meet GEICO’s preferred-risk guidelines. The new inclusion of standard- and nonstandard-risk business coincided with a large increase in advertising.